SHOULD  CONGRESS  LEGISLATE 

ON  THE 

SUBJECT  OF  RAILWAY  RATES? 

tjjfa 

ALDACE    F.  WALKER. 


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Gift  of  Seymour  B.  Durst  Old  York  Library 


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SHOULD  CONGRESS  LEGISLATE 

ON  THE 

SUBJECT  OF  RAILWAY  RATES? 


The  proper  attitude  to  be  assumed  by  the  Uuited 
States  towards  railroads  engaged  iu  interstate  com- 
merce is  one  of  the  most  important  legislative  ques- 
tions now  pending.  The  transportation  of  commodities 
and  of  persons  is  the  chief  industry  in  the  nation,  em- 
ploying the  most  men,  demanding  the  largest  current 
expenditure,  and  involving  the  greatest  amount  of  cap- 
ital. If  there  were  no  railways  our  present  industrial 
and  social  conditions  would  not  exist. 

From  the  foundation  of  our  republic  it  has  been  our 
national  policy  to  encourage  and  develop  all  legitimate 
business  enterprises.  The  taxing  power  and  the  police 
power  of  the  nation  have  been  steadily  employed  to  this 
end.  The  American  people  are  not  unjust  nor  unwise; 
they  know  the  importance  of  the  services  which  have 


been  rendered  to  the  country  by  the  American  railway 
system  and  are  proud  of  it;  they  would  not  knowingly 
permit  its  usefulness  to  be  impaired  or  withdraw  any 
right  from  its  owners.  But  we  have  now  reached  a 
point  where  those  exercising  all  other  legitimate  voca- 
tions are  recognized  as  entitled  to  proper  legislative 
protection  while  the  catch- word  applied  to  railroads  is 
"regulation;"  and  when  the  popular  idea  of  "regula- 
tion" is  analyzed  it  is  usually  found  to  mean  a  reduc- 
tion in  rates.  The  legislative  attitude  towards  rail- 
ways has  assumed  the  direction  of  repression  and  re- 
straint. Suggestions  made  for  the  preservation  of  their 
constitutional  rights  are  jeered  at.  Kailway  managers 
have  been  forced  to  pursue  methods  the  furthest  possi- 
ble from  their  desire,  both  for  the  purpose  of  warding 
off  attacks  upon  the  rights  of  the  owners  of  their  prop- 
erties and  of  conducting  business  under  laws  designed 
to  make  their  business  difficult. 

The  pretense  of  a  desire  to  be  just  is  always  put  for- 
ward, but  the  fact  remains  that  results  have  been  in 
one  direction  only.  This  tendency  even  colors  the  views 
of  those  who  recognize  the  fact  that  existing  laws  are 
unfair  and  unwise,  and  we  are  told  by  them  that  in  or- 
der to  obtain  relief  from  the  present  impossible  legisla- 
tive conditions  still  further  concessions  must  be  made. 
It  is  seriously  asserted  that  railway  rates  and  charges 
must  be  subjected  to  final  control;  that  some  outside 
power  must  always  determine  the  price  at  which  they 
shall  sell  their  wares — for,  in  the  final  analysis,  rail- 
ways manufacture  transportation  and  sell  it  to  the 
public.  The  price  to  be  charged  is  claimed  to  be  sub- 
ject to  legislative  control. 

The  railroad  interests  of  the  country  have  suffered 
greatly  during  the  last  five  years.  No  such  wholesale 
bankruptcies  have  occurred  in  any  other  industry.  In 


9 
ej 

no  other  kind  of  business  enterprise  has  so  much  capi- 
tal been  swallowed  up  and  disappeared.  In  no  other 
vocation  are  the  returns  so  trivial.  The  time  has  come 
for  the  reconsideration  of  fundamental  principles. 

There  are  two  phases  of  this  question  of  the  so-called 
rate-making  power,  in  respect  to  both  of  which  laws 
have  drifted  away  from  landmarks.  First,  that  of  con- 
stitutional right;  second,  that  of  practical  common 
sense.  Or,  to  state  the  same  questions  interrogatively : 
First,  Can  the  United  States  constitutionally  nominate 
the  rates  upon  interstate  commerce?  Second,  Should 
the  United  States  do  so  if  the  power  exists? 

I. 

Notwithstanding  that  this  power  has  long  been  as- 
sumed and  that  many  decisions  of  the  Supreme  Court 
have  proceeded  on  that  assumption,  nevertheless  there 
has  never  been  a  square  facing  of  the  question  by  that 
tribunal.  Much  can  be  said  in  support  of  the  proposi- 
tion that  the  power  "to  regulate  commerce  among  the 
several  States  and  with  foreign  nations"  does  not  in- 
clude a  power  to  fix  the  rates  which  shall  be  charged  by 
common  carriers  transporting  the  subjects  of  such  com- 
merce. The  word  "regulate"  as  used  in  this  section, 
has  been  the  subject  of  much  judicial  construction  and 
has  been  held  to  embrace  many  things.  It  has  never 
yet  been  deliberately  held  to  confer  upon  Congress  a 
rate-making  power,  to  be  employed  either  directly  or 
through  the  agency  of  a  commission. 

We  may  concede  that  Congress  has  the  right  to  pre- 
vent unjust  discrimination,  to  put  an  end  to  undue  pref- 
erences, even  to  provide  for  actions  at  law  to  recover 
unreasonable  and  exorbitant  charges — all  of  which 
may  be  said  to  be  an  extension  by  statute,  to  the  courts 


4 


of  the  United  States,  of  the  common-law  jurisdiction 
heretofore  possessed  as  to  such  matters  by  the  courts 
of  England  and  of  the  several  States.  But  there  is  no 
such  common-law  jurisdiction  of  Courts  to  award  the 
charges  tnat  may  be  made  for  future  transportation. 
If  Congress  is  to  exercise  administrative  authority  to 
that  end  it  must  produce  a  warrant  under  the  Federal 
constitution. 

In  forensic  arguments  on  this  subject  the  word  "reg- 
ulate" is  often  spoken  of  as  synonymous  with  "con- 
trol," and  the  two  words  are  often  coupled  together  as 
though  the  true  sense  of  the  clause  was  therebv  eluci- 
dated.  But  the  Constitution  does  not  use  the  word  con- 
trol.   It  uses  only  the  word  "regulate." 

The  question  is,  does  the  phrase  "regulate  com- 
merce" confer  upon  Congress  the  power  to  fix  rates; 
that  is,  prices  upon  future  interstate  transportation. 
We  all  know  that  commerce  embraces  many  elements 
besides  transportation.  It  includes  the  purchase  and 
sale  or  exchange  of  commodities  which  are  its  subject, 
as  well  as  their  transportation.  It  comprehends  the 
totality  of  that  intercourse  which  constitutes  trade  in 
any  and  all  its  forms.  (Welton  vs.  Mo.,  91  U.  S.,  280.) 
If  a  power  to  fix  prices  is  derivable  from  the  word  "reg- 
ulate" in  this  section,  it  must  apply  as  well  to  the  sale 
and  purchase  as  to  the  transportation  of  the  subjects 
of  commerce;  and  it  is  not  perceived  how  any  decision, 
founded  upon  such  a  definition  of  the  verb,  can  stop 
short  of  including  the  price  of  cotton  in  its  sale  as  well 
as  the  price  of  its  transportation. 

The  question  whether  or  not  the  particular  industry 
in  question  is  "affected  with  a  public  interest,"  made 
prominent  in  the  Granger  cases,  so  called,  has  nothing 
to  do  with  the  subject  now  in  hand.  Those  decisions 
were  concerning  the  powers  of  State  legislatures, 


5 


which  are  general  legislative  powers,  except  as  re- 
strained by  constitutional  prohibitions.  The  powder  of 
Congress  must  be  affirmatively  conferred,  and  if  a  power 
to  regulate  prices  has  been  conferred  by  the  phrase  in 
question,  it  must  apply  to  private  business  equally  with 
business  of  a  public  nature — to  everything  that  comes 
within  the  scope  of  the  word  "commerce."  If  not  con- 
ferred by  this  phrase  the  power  does  not  exist,  whether 
the  business  be  of  a  public  or  of  a  private  nature. 

Again,  the  power  over  rates  and  charges  for  trans- 
portation, said  to  rest  in  State  legislatures,  is  made 
available  (as  against  the  legislative  inviolability  of  con- 
tracts) through  the  reserved  control  found  in  the  char- 
ters of  corporations,  which,  since  the  Dartmouth  Col- 
lege case,  customarily  provide  that  the  legislature  may 
alter,  amend  or  repeal  at  will.  Railroad  franchises, 
with  few  exceptions,  are  State  grants.  The  State  gives 
them  being.  In  effect  they  are  the  works  of  the  several 
States,  being  constructed  under  their  direct  authority. 
(E.  E.  Co.  vs.  Maryland,  21  Wallace,  470.)  But  this  rea- 
soning does  not  support  the  power  claimed  for  Con- 
gress. Its  relation  to  the  individual  coiporations  is 
coupled  with  no  system  of  parentage.  So  far  as  the 
Congress  or  the  courts  of  the  United  States  are  con- 
cerned, each  railroad  company  is  a  citizen  of  one  or 
more  States,  and  must  be  legislated  about  or  impleaded 
as  such  a  citizen,  always  under  some  express  grant  of  a 
power  to  be  found  within  the  four  corners  of  tliG  Fed- 
eral Constitution. 

Looking  at  this  clause  historically,  there  is  not  the 
slightest  question  of  the  fact  that  no  such  power  was 
understood  to  be  conferred  by  the  framers  of  the  Con- 
stitution.  This  proposition  might  be  supported  by  a 
long  array  of  interesting  citations,  but  as  it  has  been 
repeatedly  conceded  by  the  Supreme  Court  of  the 


6 


United  States  the  details  of  its  proof  are  unnecessary. 
One  of  the  frequent  illustrations  of  the  difficulty  to  be 
corrected  was  found  in  the  impediments  put  by  the 
States  in  the  way  of  commerce  between  New  Jersey 
and  New  York  City.  No  one  suggested  that  the  section 
would  authorize  a  subsequent  Congress  to  establish 
rates  for  this  ferriage  service,  and  the  very  idea  would 
evidently  have  been  abhorrent. 

At  the  first  session  of  Congress  the  duties  on  tea 
were  adjusted  at  from  6  to  20  cents  per  pound,  accord- 
ing to  quality,  when  imported  in  American  vessels;  and 
from  15  to  45  cents  per  pound  if  imported  in  foreign  ves- 
sels. The  reason  for  this  was  thus  explained  in  debate: 
"This  tax  is  meant  not  only  for  revenue,  but  as  a  reg- 
ulation of  commerce  highly  advantageous  to  the 
United  States."  The  word  "regulate"  was  not  used  to 
signify  control,  restrain,  repress.  On  the  contrary,  it 
meant  promote,  encourage,  develop.  The  regulation  of 
commerce  with  foreign  nations  was  to  be  accomplished 
by  the  judicious  employment  of  duties  and  imposts 
and  by  a  common  system  of  navigation  laws.  Its  reg- 
ulation among  the  several  States  was  to  be  provided 
for  by  eradicating  everything  that  might  interfere  with 
freedom  of  intercourse.  "A  power  to  prevent  embar- 
rassing restrictions  by  any  State  was  the  thing  de- 
sired." (State  Freight  Tax,  15  Wallace,  275.)  The 
thing  granted  was  "the  right  of  superintending  the 
commercial  regulations  of  every  State,  that  none  shall 
take  place  that  shall  be  partial  or  contrary  to  the  com- 
mon interest."    (Gibbons  vs.  Ogden,  9  Wheaton,  224.) 

The  Supreme  Court  has  decided  that  the  word  "com- 
merce" broadens  with  the  progress  of  the  times;  that 
intercourse  by  telegraph  for  example,  unknown  in  1787, 
is  within  the  protection  of  the  commerce  clause.  In 
the  regulation  of  commerce  by  sea  Congress  has  taken 


7 


full  charge  of  the  subject  of  navigation,  defining  what 
shall  constitute  American  vessels,  how  registered,  en- 
rolled or  licensed;  has  established  rules  of  meeting  at 
sea;  also  provisions  for  the  health,  safety  and  comfort 
of  crews;  inspection  of  boilers,  etc.  In  these  matters, 
as  is  said  by  Justice  Field,  in  Sherlock  vs.  Allen  (93 
U.  S.  99):  "The  commercial  power  conferred  by  the 
Constitution  is  without  limitation.  It  authorizes  leg- 
islation in  respect  to  all  the  subjects,  persons  and  in- 
struments." In  this,  the  broadest  statement  that  has 
ever  been  made  of  the  power  conferred  by  the  com- 
merce clause,  there  is  no  indication  of  a  power  to  con- 
trol rates  by  the  imposition  of  maximum  or  minimum 
charges.  The  existence  of  a  power  to  prescribe  sea- 
going rates  has  never  been  even  squinted  at  by  the  Su- 
preme Court,  and  Justice  Field  would  have  been  the 
last  member  of  that  court  to  concede  it.  Yet,  if  Con- 
gress has  power  to  prescribe  rates  for  transportation 
in  commerce  between  the  several  States,  it  has  the 
same  power  concerning  commerce  "with  foreign  na- 
tions." 

The  first  important  act  of  Congress  respecting  inter- 
state commerce  was  passed  June  15,  1866.  It  author- 
ized railroads,  chartered  by  the  several  States,  to  com- 
bine with  roads  of  other  States  so  as  to  form  continu- 
ous lines.  This  act  has  been  called  the  charter  of  the 
American  Railway  System.  Its  object  was  to  prevent 
the  States  from  impeding  commerce.  "It  was  not  in- 
tended to  invade  the  domain  of  private  contracts." 
(E.  R.  Co.  vs.  Richmond,  19  Wallace,  599.)  This  act  was 
unquestionably  within  the  constitutional  powers  of 
Congress. 

For  the  purpose  of  the  present  argument  it  may  be 
conceded  that  the  Interstate  Commerce  lawis  also  with- 
in these  powers.    At  the  common  law  the  relations  be- 


8 


tween  carrier  and  shipper  are  those  of  a  bailment,  gov- 
erned by  the  contract  of  affreightment  wnich  exists  in 
each  case.  The  common  carrier  must  accept  all  freight 
that  is  tendered,  of  the  kind  and  in  the  manner  estab- 
lished by  his  usage.  He  is  almost  an  insurer  of  the 
goods.  He  has  a  lien  for  his  charges  or  may  require 
payment  in  advance.  He  is  bound  to  treat  all  patrons 
justly  and  without  undue  preference  or  unjust  discrim- 
ination, and  he  is  subject  to  an  action  for  damages  if 
he  extorts  an  unreasonable  rate.  These  features  of 
the  common  law  are  the  leading  features  of  the  "Act 
to  regulate  commerce/'  and  jurisdiction  for  their  en- 
forcement is  conferred  upon  the  courts  of  the  United 
States.  The  Commission  established  by  the  law  is 
clearly  an  administrative  body,  rather  than  judicial, 
designed  to  stand  as  a  kind  of  tribunal  of  conciliation 
between  shippers  and  carriers.  The  method  by  which 
its  "recommendations"  gradually  broadened  into  "no- 
tices" and  "orders"  need  not  be  here  referred  to,  for 
the  final  decision  of  each  controversy  is  with  the  courts. 

The  transportation  charge  formulated  in  the  rail- 
way tariffs  is  not  a  tax.  Ingenious  writers  have  so 
styled  it,  but  the  idea  is  wholly  fanciful.  Its  origin  is 
traceable  to  the  public  highway  theory  of  railway  serv- 
ice, the  argument  being  substantially  this :  A  railroad 
is  a  highway  of  commerce;  the  establishment  of  high- 
ways is  a  universally  recognized  duty  of  the  State; 
hence  railroads  in  their  service  are  performing  a  gov- 
ernmental function  as  agents  of  the  State.  The  State 
may  impose  tolls  for  the  use  of  its  public  works;  hence, 
the  charges  of  railroads  are  assessed  under  the  taxing 
power. 

It  is  true  that  the  railway  is  an  improved  highway; 
but  the  construction  and  maintenance  of  a  railway  is 
one  thing,  while  the  conducting  of  the  business  of 


9 


transportation  upon  the  railway  is  another.  The  old 
highway  was  the  field  upon  which  the  common  carrier 
entered  and  did  his  work.  The  transportation  business 
has  never  been  regarded  as  a  function  of  government. 
It  has  of  late  years  been  assumed  to  some  extent  in 
monarchical  countries,  where  capital  does  not  readily 
combine  and  where  military  considerations  control. 
There  have  been  a  few  cases  in  countries  subject  to  the 
common  law  where  a  State  has  both  owned  and  oper- 
ated a  railroad,  but  never  successfully.  The  duty  of 
transporting  goods  and  persons  has  never  been,  as- 
sumed by  the  government  of  England  or  of  the  United 
States.  The  State  provides  roads  where  natural  water- 
ways do  not  exist,  but  leaves  the  carriage  thereon  to 
private  enterprise  and  private  contract.  The  transpor- 
tation charge  is  remuneration  for  a  service  rendered. 
It  involves  the  use  of  the  highway,  just  as  the  carrier  by 
wagon  may  have  had  to  pay  his  tolls  in  order  to  pass 
along  the  turnpike,  and  in  that  case  added  them  to  his 
bill  for  carriage;  but  the  business  of  furnishing  roads 
is  entirely  distinct  from  that  of  furnishing  transporta- 
tion. The  original  railway  charters  contemplated  com- 
mon use  by  the  public  which  was  found  practically  im- 
possible; a  common  carrier  by  rail  is  perforce  conceded 
a  monopoly  over  his  particular  route  of  travel,  whether 
he  owns  it  or  leases  it. 

If  carriers  by  rail  are  common  carriers  at  all  the  re- 
lation between  them  and  their  shippers  is  necessarily 
a  contract  relation.  The  act  to  regulate  commerce 
treats  them  as  common  carriers  from  the  first  line  to 
the  end.  A  railway  freight  bill  is  not  a  tax  bill,  and 
the  price  charged  is  not  subject  to  nomination  by  the 
Federal  Government  upon  any  such  theory  as  that. 

Coming  back  to  the  Granger  cases,  which  authorized 
State  interference  with  local  railwav  rates,  we  find 


10 


that  the  authority  there  asserted  resides  in  the  Legisla- 
tures of  the  several  States  and  not  in  the  Federal  Con- 
gress. This  distinction  is  clearly  pointed  out  by  Chief 
Justice  Waite.  (Munn  vs.  111.  94  U.  S.,  124.)  The 
court  there  held  that  the  power  to  establish  prices  for 
transportation  by  common  carriers  existed  in  the  sev- 
eral States  not  as  a  regulation  of  commerce,  but  as  a 
power  of  government  at  common  law,  to  fix  the  charges 
of  bakers,  hackmen,  millers,  innkeepers,  ferries,  whar- 
fingers, common  carriers,  etc.,  because  their  business  is 
"affected  by  a  public  interest;'7  a  power  inherited  from 
the  English  Parliament  by  the  State  Legislatures,  but 
not  belonging  to  Congress  unless  openly  conferred  by 
the  Constitution,  except  possibly  as  to  the  District  of 
Columbia  and  the  Territories  (58  Fed.  Kep.  858). 

Thus,  as  we  think  properly,  every  consideration  is 
eliminated  save  the  naked  definition  of  the  phrase, 
What  is  it  to  regulate  commerce?  When  we  once  de- 
part from  the  idea  entertained  by  the  framers  of  the 
language  the  field  opened  is  a  broad  one,  but  we  think 
a  clear  and  just  limitation  can  be  defined.  The  clause 
must  be  construed  so  as  to  harmonize  with  the  fifth 
amendment,  which  restricts  the  powers  of  Congress, 
much  as  the  powers  of  States  are  restricted  by  the  four- 
teenth amendment.  In  regulating  the  subjects  of  in- 
terstate and  foreign  commerce,  we  may  concede  a  right 
to  promote  the  exchange  of  commodities,  when  deemed 
desirable  for  the  common  good,  and  to  suppress  the 
exchange  of  such  as  are  dangerous  to  life,  health  or 
the  general  prosperity;  but  not  to  forbid  traffic  in  legit- 
imate property,  such  as  the  necessaries  of  life,  its  com- 
forts and  its  luxuries.  In  regulating  the  persons  en- 
gaged in  commerce,  we  may  admit  a  right  to  examine 
and  license  shipmasters,  engineers,  etc.,  for  the  safety 
and  protection  of  all  concerned,  but  not  to  exclude  any 


11 


1 


citizen  or  designated  class  of  citizens  from  the  pur- 
chase of  a  seaworthy  ship,  or  of  wagons,  or  railroads, 
or  their  employment  in  commerce.  In  regulating  the 
instruments  of  commerce  we  may  allow  the  existence 
of  power  to  supervise  the  physical  operation  of  vessels, 
railway  trains,  etc. ;  to  see  to  it  that  brakes  are  continu- 
ous, ship  boilers  safe  and  life-boats  ample.  But  when 
we  come  to  the  matter  of  contracting  foi  services  to  be 
rendered  we  find  that  property,  by  the  fifth  amend- 
ment, is  as  sacred  as  life  and  liberty,  and  that  any  com- 
mon carrier  tendering  his  facilities  to  the  public  may 
make  his  price  what  he  will,  subject  to  his  responsibil- 
ity in  the  courts  for  damages  if  he  commits  unjust  dis- 
crimination or  extortion. 

There  is  grave  question  respecting  the  constitu- 
tional power  of  Congress  to  prescribe  future  maximum 
rates,  enforceable  by  injunction.    This  because: 

First.  No  such  power  was  contemplated  by  the  fram- 
ers  of  the  Constitution. 

Second.  The  Constitution  has  not  yet  been  so  con- 
strued by  the  Supreme  Court. 

Third.  The  words  "regulate  commerce"  do  not  imply 
its  existence  on  any  fair  construction  of  their  meaning. 

Fourth.  Such  a  construction  would  interfere  with 
and  destroy  rights  of  property,  assured  by  other 
clauses. 

Fifth.  The  clause  cannot  be  so  construed  without 
involving  the  power  to  regulate  the  rates  to  be  charged 
by  vessels  engaged  in  commerce  with  foreign  nations, 
and  also  prices  generally  in  commercial  transactions. 

II. 

Supposing,  however,  that  the  right  to  fix  future  rail- 
way rates  upon  interstate  traffic  has  beeen  constitu- 


12 


tionally  delegated  to  Congress  m  such  manner  that  it 
may  be  exercised  either  directly  or  through  a  commis- 
sion, is  the  exercise  by  Congress  of  such  a  power  desir- 
able or  wise? 

In  the  first  place,  it  should  be  noted  that  if  Con- 
gress can  confer  such  a  power  upon  a  commisssion  it 
can  exercise  it  directly  by  Act.  To  see  where  this 
would  lead  us  one  or  two  concrete  cases  out  of  thou- 
sands may  be  suggested.  Suppose  a  member  from 
Georgia  should  introduce  a  bill  to  reduce  the  rate  on 
marble  to  25  cents  per  hundred  pounds  from  points  in 
Georgia  to  Chicago,  and  suppose  also  that  the  rate  on 
marble  from  Vermont  to  Chicago  is  50  cents  per  hun- 
dred pounds.  The  proposed  reduction  would  shut  out 
Vermont  marble  from  a  large  part  of  its  present  ter- 
ritory. New  England  would  naturally  rally  to  the  de- 
fense of  Vermont,  and  the  rate  on  marble  would  be- 
come a  political  issue,  with  locality  arrayed  against  lo- 
cality, with  bargains  to  be  made,  with  personal  inter- 
ests to  be  promoted.  Or  suppose  again  that  the  rate 
on  lumber  from  Wisconsin  and  Michigan  points  to 
Kansas  and  Nebraska  should  become  a  matter  of  Con- 
gressional legislation  as  compared  with  lumber  rates 
from  Arkansas,  Louisiana,  Mississippi  and  Oregon  to 
the  same  territory.  Or  suppose  a  bill  should  be  in- 
troduced to  prevent  railroads  from  transporting  or- 
anges from  California  to  New  York  at  less  than  $1.50 
per  hundred  pounds  on  the  ground  that  such  transpor- 
tation has  a  tendency  to  injure  the  orange  growers  of 
Florida;  or  to  reduce  rates  from  both  States  in  order  to 
exclude  fruits  from  other  countries.  Such  examples 
need  not  be  multiplied.  There  is  no  citizen  who  would 
not  deprecate  the  introduction  of  such  questions  into 
the  halls  of  Congress.     Nevertheless,  such  legislative 


13 


experiments  are  in  sight  if  we  once  concede  the  propri- 
ety of  Congressional  legislation  upon  railroad  rates. 

The  Interstate  Commerce  law  as  passed  in  1887  did 
not  confer  any  rate-making  power  upon  the  Interstate 
Commerce  Commission.  At  the  time  of  its  passage  no 
one  supposed  that  it  did.  The  enactment  of  that  law 
was  preceded  by  long  investigations  conducted  by  suc- 
cessive committees.  The  report  of  the  last  (Cullom) 
committee  undertook  to  formulate  the  then  existing 
"causes  of  complaint  against  the  railway  system." 
Eighteen  complaints  were  scheduled,  for  the  correction 
of  which  Congressional  action  was  proposed.  They 
covered  the  subjects  of  the  relation  of  local  rates  to 
through  rates,  unjust  discriminations,  rebates,  secret 
rates,  fluctuations  in  rates,  overcharges,  misunder- 
standings through  varying  classifications  and  other- 
wise, passes,  wasteful  management,  etc.  No  complaint 
was  stated  in  respect  to  extortionate  rates.  No  sub- 
stantial complaint  exists  on  that  subject  to-day. 

But  we  are  not  left  merely  to  the  negative  inference 
thus  indicated,  in  determining  what  was  intended  in 
the  passage  of  that  law.  The  Senate  committee,  after 
scheduling  complaints,  proceeded  to  state  that  their 
essence  was  unjust  discrimination,  "This  is  the  prin- 
cipal cause  of  complaint  against  the  management  and 
operation  of  the  transportation  system  of  the  United 
States."  Then,  after  a  careful  discussion  of  what  dis- 
criminations may  be  justified  and  what  discriminations 
must  be  regarded  as  unjust,  their  report  contains  the 
following  sub-head:  "Fixing  of  rates  by  legislation 
impracticable." 

This  proposition  is  argued  at  length,  and  established 
to  the  satisfaction  of  the  committee — and,  I  may  add, 
of  evervbodv  else.  The  statement  is  made  that  "it 
would  be  inexpedient  and  impracticable  to  attempt  to 


14 


adjust  existing  inequalities  by  any  system  of  rates  es- 
tablished by  legislation/'  which  proposition  is  devel- 
oped fully. 

Finally,  after  discussing  many  other  matters  foreign 
to  the  present  subject,  the  committee  concluded  its 
able  report  by  an  explanation  of  ".The  Committee's 
Bill,"  stated  as  representing  its  substantially  unani- 
mous judgment.  "The  provisions  of  the  bill  are  based 
upon  the  theory  that  the  paramount  evil  chargeable 
against  the  operation  of  the  transportation  system  of 
the  United  States  as  now  conducted  is  unjust  discrim- 
ination between  persons,  places,  commodities,  or  par- 
ticular descriptions  of  traffic.  The  underlying  pur- 
pose or  aim  of  the  measure  is  the  prevention  of  these 
discriminations  both  by  declaring  them,  unlawful  and 
enforcing  punishment,  and  also  by  requiring  the  great- 
est practicable  degree  of  publicity  as  to  the  rates, 
financial  operations  and  methods  of  management  of 
the  carriers." 

The  bill  thus  described  became  the  Interstate  Com- 
merce law — the  short-haul  and  anti-pooling  clauses 
being  afterwards  unfortunately  added  by  the  House. 
It  was  not  intended  to  authorize  the  Commission  to 
name  rates  and  it  scrupulously  omitted  to  confer  any 
such  authority. 

The  Commission  itself  was  at  first  in  harmony  with 
this  view  of  the  situation.  It  disclaimed  authority  to 
nominate  rates;  but  later  on  the  views  of  Commission- 
ers changed.  .  In  the  absence  of  a  power  to  say  what 
should  be  a  reasonable  rate  they  found  themselves  un- 
able to  accomplish  results  which  they  seemed  to  think 
desirable,  and  began  to  cast  about  to  discover  whether 
after  all  the  desired  authority  had  not  been  unwittingly 
conferred.  They  issued  "orders"  requiring  carriers  not 
to  charge  in  excess  of  rates  named  by  them  as  reason- 


15 


able  and  also  to  make  reparation  for  charges  paid  in 
excess  of  such  rates.  And  after  several  years  of  labor- 
ious genesis,  the  Commission  developed  in  its  annual 
reports  a  theory  under  which  it  attempted  to  justify  it- 
self in  respect  to  various  litigations  which  it  had  insti- 
tuted and  was  conducting  in  the  courts  against  certain 
railroads  to  compel  them  to  put  in  effect  a  series  of 
tariffs  which  that  body  had  formulated  for  the  trans- 
portation of  different  commodities  in  various  parts  of 
the  country.  Its  reasoning  was  substantially  this:  The 
Commission  has  found  that  a  certain  rate  discriminates 
unjustly,  or  that  another  rate  is  excessive.  It  is  neces- 
sary, in  order  to  make  our  finding  effective,  that  we 
go  further  and  say  what  rate  would  be  non-discrimina- 
tive or  what  sum  would  be  reasonable  and  just. 

Could  anything  be  clearer?  And  yet,  the  roads  per- 
sisted in  defending  the  litigations,  and  now  the  Su- 
preme Court  has  finally  decided  that  the  roads  were 
right  and  the  Commission  was  wrong,  and  that  no  au- 
thority to  nominate  rates  was  conferred  on  the  Com- 
mission by  the  Interstate  Commerce  Law. 

The  law  has  thus  been  brought  back  to  its  moorings 
and  has  been  decided  to  mean  precisely  what  every- 
body understood  it  to  mean  at  the  beginning.  The 
same  history  has  occurred  in  respect  to  the  short-haul 
clause  and  other  provisions  of  the  law.  Thereupon  the 
Court  is  accused  of  having  weakened  the  law  by  inter- 
preting the  life  out  of  it,  of  having  riddled  it,  of  hav- 
ing left  but  a  skeleton,  and  all  that  sort  of  thing.  In 
fact,  the  Court  has  simply  corrected  erroneous  inter- 
pretations of  the  statute,  and  has  rebuked  efforts  to 
read  into  its  language  powers  that  were  never  intended 
to  be  conferred.  Aside  from  the  short-haul  and  anti- 
pooling  provisions,  the  Interstate  Commerce  Law  was 
a  well-considered  and  useful  statute;  but  a  little  au- 


16 


thority  naturally  leads  to  the  effort  to  secure  more,  and 
it  is  not  the  wise  judge  alone  who  seeks  to  amplify  his 
jurisdiction. 

It  seems  that  the  railroads  are  now  to  expect  a  new 
attack.  Clamor  has  been  raised  that  the  Supreme 
Court,  by  construction,  has  emasculated  the  statute, 
and  that  Congress  must  forthwith  confer  all  the  powers 
which  the  Court  has  said  are  not  at  present  given.  To 
speak  more  concretely  in  relation  to  the  present  sub- 
ject, it  is  demanded  that  the  power  to  make  rates  be 
now  conferred  upon  the  Commission. 

But  why?  Let  us  look  at  the  matter  seriously.  What 
has  occurred  since  1887  to  make  this  proper  legislation 
for  Congress  to  undertake?  If  it  was  not  then  expe- 
dient or  practicable,  is  it  expedient  or  practicable 
now?  Have  railway  rates  advanced  since  1887?  Has 
extortion  been  committed?  Have  we  not  the  lowest 
rates  in  the  world?  Have  not  bankruptcy  and  reor- 
ganization been  the  almost  universal  experience  of  rail- 
road companies? 

But,  some  one  says,  when  unjust  discrimination  is 
charged  the  Commission  should  have  power  to  say 
what  reduction  is  required  to  overcome  the  discrimina- 
tion, if  its  existence  be  established.  This  power  would 
no  doubt  gratify  the  Commission,  but  is  there  any  other 
valid  reason  for  granting  it?  The  injured  party  has  a 
right  of  action,  the  same  as  for  any  other  pecuniary 
injury;  even  more,  for  he  may  elect  between  proceeding 
for  damages  or  for  restraint;  and  the  Commission  may 
not  be  infallible. 

This  question  is  of  infinitely  broader  scope  than  is 
conceived  by  those  who  treat  it  as  such  a  simple  mat- 
ter. There  are  two  ways  in  which  railroads  may  be 
managed;  one  is  the  bureaucratic  method  of  countries 
having  State  railways,  in  which  competition  is  set 


17 


aside  so  far  as  possible  by  divisions  of  territory  and  of 
traffic,  and  rates  are  named  upon  somebody's  idea  of 
what  was  thought  proper  when  the  roads  were  opened. 
The  other  is  the  competitive  system,  under  which  vary- 
ing competitive  forces  determine  from  time  to  time  the 
maximum  rates  that  can  be  charged,  and  the  desire 
to  attract  business  reduces  these  maxima  freely. 
The  latter  system  is  that  of  countries  subject  to  the 
common  law.  To  go  over  to  the  bureaucratic  system 
is  contrary  to  the  spirit  of  our  institutions;  it  is  worse 
than  that,  for  it  would  endanger  our  national  progress. 
Under  rates  controlled  by  competition  our  country  has 
expanded  and  developed  beyond  what  any  other  nation 
would  think  credible.  Eates  have  been  constantly  re- 
duced, and  doubtless  the  flexibility  of  rates  in  their 
adaptation  to  business  conditions  and  the  continual 
opening  of  new  enterprises,  channels  of  trade,  and  mar- 
kets have  been  largely  due  to  the  fact  that  no  bureau 
has  supervised  railway  traffic. 

It  is  without  doubt  true  that  railway  rates  are  now 
much  lower  than  they  would  have  been  had  a  public 
rate-making  body  been  established  twenty  years  ago; 
and  in  this  view  it  may  be  said  that  the  creation  of  a 
rate  bureau  would  be  a  protection  to  the  revenues  of 
the  roads.  This  may  be  so;  but  railway  officials  do  not 
desiie  a  protection  which  would  prevent  them  from 
constant  efforts  to  develop  the  traffic  of  their  respective 
lines. 

It  would  be  a  sorry  day  for  our  country  were  a  rate- 
making  power  given  to  any  possible  tribunal.  Its  mere 
existence  would  threaten  all  energy  and  enterprise.  Its 
exercise  would  either  overturn  competitive  conditions, 
which  would  be  ruinous,  or  it  would  acknowledge  them, 
which  is  the  present  system. 


18 


In  other  words,  the  rate-making  authority  must 
either  recognize  the  competitive  forces  applicable  to 
the  situation  or  must  ignore  them.  In  the  first  case  no 
interference  is  needed.  The  second  alternative  would 
be  contrary  to  the  genius  of  our  institutions,  and  dis- 
aster would  inevitably  ensue. 

Except  in  nations  where  the  State  manages  the  rail- 
roads, transportation  charges  by  land  and  by  sea  are 
regulated  by  competition.     State  ownership  would 
mean  high  tariffs  and  retarded  commercial  progress; 
competition  is  the  safe  governing  force  in  respect  to 
all  contractual  matters.   While  it  is  true  that  excessive 
competition  must  be  regulated  and  ameliorated  in  or- 
der that  each  competitive  agency  may  preserve  an  in- 
dependent existence,  such  regulation  will  come  from 
within  unless  prevented  by  unwise  laws.   On  the  other 
hand,  competition  has  ample  strength  to  overthrow 
combinations  designed  to  unduly  restrict  its  freedom. 
As  a  practical  proposition,  it  is  undeniably  true  in  this 
matter  as  in  many  others  that  too  much  government 
is  attempted.    Instead  of  more  laws  there  should  be 
fewer  laws.   Competition  is  a  natural  force;  like  other 
forces  of  nature,  it  will  do  its  best  work  when  let  alone. 

To  attempt  to  fix  transportation  rates  upon  the  inter- 
state commerce  of  the  United  States  by  any  possible 
vis  major  that  can  be  devised  for  that  purpose,  would 
be  to  substitute  a  narrow,  fluctuating,  human  view  of 
what  justice  may  be  thought  from  time  to  time  to  re- 
quire, for  the  broad,  persistent,  dominating  conditions 
which  competition  will  forever  create  and  preserve. 

It  may  be  said,  however,  that  it  is  not  at  this  time 
proposed  to  discard  competition  as  a  regulative  force, 
but  to  leave  it  in  full  play  and,  in  addition,  give  author- 
ity to  the  Commission  to  make  further  reductions  in 
cases  where  the  reductions  forced  by  competition  do 


19 


not  seem  to  them  sufficient.  This  proposition  is  seri- 
ously made,  but  nothing  could  be  more  unjust  to  rail- 
way interests  or  unwise  on  the  part  of  the  public.  Un- 
just, because  the  revenues  of  the  carriers  are  now  de- 
pleted by  the  action  of  natural  forces  so  excessive  as 
to  require  restraint,  not  reinforcement;  unwise,  be- 
cause the  public  would  in  the  end  bear  the  burden 
through  impaired  service,  business  calamities,  reduced 
wages,  and  all  the  reactions  that  invariably  follow  the 
doing  of  injustice. 

We  may  look  to  the  past  to  learn  just  what  this 
scheme  proposes.  Most  of  the  cases  in  which  the  Com- 
mission, in  the  previous  misconception  of  its  powers, 
has  undertaken  to  name  a  rate  which  should  not  be 
exceeded  have  been  occasions  where  the  real  difficulty 
was  excessive  competition.  For  example,  the  lumber 
rates  in  the  Northwest;  an  order  was  made  that  a  cer- 
tain railroad  should  not  charge  above  a  certain  rate, 
amounting  to  a  reduction  of  two  or  three  cents  per 
hundred  weight.  The  road  in  question  was  quite  will- 
ing to  make  this  reduction,  hoping  thereby  to  increase 
its  tonnage;  but  its  competitors,  who  were  carrying 
lumber  from  other  points  to  the  same  market,  at  once 
reduced  their  rates  by  the  same  amount,  so  that  the 
shippers  by  the  first  line  got  no  relief,  while  the  rail- 
road was  robbed  of  its  revenue  without  any  useful  pur- 
pose being  subserved.  This  was  a  case  where  the  Com- 
mission undertook  to  correct  what  it  considered  to  be 
an  unjust  discrimination.  But  does  not  the  result 
prove  that  in  fact  there  was  no  unjust  discrimination? 
If  a  certain  condition  is  forced  by  competition,  even 
though  upon  inspection  of  distance-tables  and  tariffs  it 
appears  to  be  unnatural  and  unfair,  the  State  may 
safely  assume  that  the  apparent  discrimination  is  the 
result  of  inherent  disabilities  on  the  one  hand  or  ad- 


20 


vantages  on  the  other.  Competitive  forces  are  too  in- 
tricate and  delicate  to  be  controlled  by  the  insertion 
of  a  crowbar  here  and  there.  There  are  many  appar- 
ent evils  in  the  world  which  benevolence  is  unable  to 
assuage.  We  must  determine  such  general  lines  of 
policy  as  are  likely  to  promote  the  greatest  good  of  the 
greatest  number.  In  the  matter  of  railway  rates  there 
can  be  no  possible  question  that  the  true  policy  con- 
sists in  remitting  their  control  absolutely  to  natural 
laws  without  interference  by  State  or  Xation. 

III. 

In  view  of  the  fact  now  generally  conceded,  that  the 
prohibition  of  pooling  was  unwise  and  has  prevented 
the  obtaining  of  many  good  results  hoped  for  from  the 
passage  of  the  Interstate  Commerce  Law,  it  seems 
probable  that  Congress  will  be  compelled  to  authorize 
pooling  agreements  as  an  aid  to  the  regulative  statute. 
The  prohibition  of  pooling  made  unjust  discrimination 
inevitable  on  the  largest  possible  scale.  But  in  con- 
nection with  the  proposal  to  correct  this  admitted  mis- 
take it  is  said  that  rates  should  be  subjected  to  abso- 
lute and  effective  control.  This  proposition  is  sometimes 
presented  as  though  the  railroads  were  being  granted 
a  favor,  in  consideration  of  which  a  concession  should 
be  extorted;  whereas  the  legalizing  of  pools  is  for  the 
benefit  of  shippers  as  much  or  more  than  of  the  rail- 
roads. At  other  times  it  is  said  that  pools  will  destroy 
competition,  and  unless  rates  are  controlled  they  will 
become  excessive;  to  which  there  are  two  answers: 
first,  pools  will  not  destroy  competition;  second,  ex- 
cessive rates  cannot  be  exacted.  History  and  the  tes- 
timony of  experts  proves  that  while  pools  tend  to  regu- 
late competitive  excesses,  they  do  not  and  never  can 
efface  legitimate  competition,  or  even  seriously  weaken 


21 


its  vitality.  The  making  of  excessive  rates  is  no  longer 
practically  possible  in  the  United  States.  It  is  an  en- 
tire fallacy  to  suppose  that  the  rate  to  be  charged  on 
any  given  traffic  is  subject  to  the  decree  of  the  rail- 
way traffic  manager  or  even  to  the  decree  of  groups  of 
traffic  managers.  They  can  reduce  rates,  but  except 
in  rare  and  peculiar  cases  they  cannot  make  them 
higher  than  the  maxima  forced  by  competitive  condi- 
tions, which  control  railway  rates  in  substantially 
every  corner  of  the  land.  And  the  rare  and  peculiar 
cases  will  either  presently  correct  themselves  or  can 
be  corrected  through  existing  machinery  to  that  end. 

The  fundamental  proposition  that  the  naming  of 
rates  for  future  use  upon  interstate  railway  traffic 
ought  not  to  be  made  a  subject  of  Congressional  legis- 
lation should  be  unhesitatingly  accepted. 

A  very  practical  phase  of  the  present  situation  must, 
however,  be  considered.  It  concerns  the  form  that 
may  most  judiciously  be  given  to  legislation  in  the 
present  Congress. 

The  present  difficulty  arises  from  two  sources:  First, 
the  existing  indisposition  in  legislative  chambers  to 
concede  to  the  railway  system  of  the  country  the  fos- 
tering care  which  is  bestowed  freely  upon  all  other  in- 
dustries, or  to  give  even  slight  consideration  to  the  re- 
quirements of  justice  in  their  behalf;  second,  the  appar- 
ent inability  of  those  who  recognize  the  necessity  of 
action  of  some  kind  to  understand  clearly  the  condi- 
tions of  the  case,  and  their  unwillingness  to  act,  as  they 
would  do  in  other  matters,  upon  the  opinions  and  testi- 
mony of  those  familiar  with  the  practical  management 
of  railway  transportation. 

I  have  spoken  of  present  legislative  conditions  as 
"impossible."  .  This  word  is  used  in  all  seriousness.  It 


22 


has  been  held  that  the  Anti-Trust  Law  forbids  railroads 
to  use  the  only  practical  method  for  doing  the  things 
which  the  Interstate  Commerce  Law  commands.  And 
it  is  an  admitted  truth  that  the  Interstate  Commerce 
Law  seeks  to  enforce  competition  by  the  mandate  of 
the  statute,  and  at  the  same  time  punishes  as  criminal 
misdemeanors  the  acts  and  methods  by  which  compe- 
tition is  ordinarily  effected.  The  result,  as  has  been 
tersely  stated,  is  that  in  many  localities  and  with  ref- 
erence to  manv  commodities,  a  man  who  obevs  the  stat- 
ute  law  can  "neither  operate  a  railroad  nor  ship  over  a 
railroad.'7 

This  is  the  pass  to  which  this  industry  has  been 
brought  by  inconsiderate  legislation.  Practical  and 
commercial  conditions  have  been  ignored.  Contradic- 
tory laws  have  been  enacted.  Prompt  Congressional 
legislation  is  absolutely  required. 

This  action  must  cover  two  fundamental  points. 
First,  the  Anti-Trust  Law  must  be  so  modified  that 
railroads  may  act  together  in  performing  the  require- 
ments of  the  Interstate  Commerce  Law ;  second,  the  In- 
terstate Commerce  Law  must  be  so  amended  that  rail- 
roads may  apportion  the  earnings  of  common  traffic, 
and  thus  make  possible  the  elimination  of  unjust  dis- 
criminations from  the  transportation  service.  Under 
past  arduous  conditions  the  railroads  have  diligently 
though  often  vainly  attempted  to  conform  to  legal  re- 
quirements through  the  agency  of  voluntary  associa- 
tions. Kailway  managers  sincerely  desire  to  operate 
their  properties  in  conformity  to  law.  The  law  re- 
quires that  all  rates  be  fixed  and  published,  and  uni- 
form rates  are  conceded  to  be  an  absolute  necessity. 
This  work  has  been  one  of  the  functions  of  the  asso- 
ciations which  the  Anti-Trust  Law  has  been  held  to 
suppress.    Their  other  function  has  been  the  preven- 


23 


tion  of  unjust  discriminations;  or,  in  other  words,  the 
maintenance  of  rates  as  published,  neither  more  nor 
less.  This  has  been  accomplished  at  times  for  shorter 
or  longer  periods;  it  cannot  be  successfully  and  contin- 
uously accomplished  unless  supported  by  the  appor- 
tionment of  common  traffic  or  its  earnings;  hence  the 
necessity  for  the  legalization  of  contracts  for  that  pur- 
pose. 

The  necessary  legislative  requirements  cannot  be  un- 
derstood without  keeping  clearly  in  mind  the  two 
points  above  distinguished.  Railways  must  associate 
and  mutually  weigh  all  competitive  conditions  in  order 
to  fix  uniform  rates;  they  must  associate  and  apportion 
certain  sections  of  their  traffic  in  order  to  maintain  the 
rates  so  fixed. 

While  both  these  functions  are  usually  covered  by 
the  same  association  agreement  they  are  absolutely  di- 
verse, Pooling  is  not  an  agency  for  the  fixing  of  rates, 
but  for  maintaining  rates;  not  maintaining  the  stand- 
ard of  rates,  but  maintaining  the  actual  rates,  which 
necessarily  fluctuate  from  time  to  time  in  accordance 
with  competitive  and  business  conditions.  Kates  may 
vary  every  day  and  yet  be  strictly  "maintained." 

In  their  best  estate  associations  agree  upon  rates,  by 
mutual  consent  if  possible,  but  preserving  to  members 
the  right  of  independent  action.  Every  change  is  made 
in  view  of  competition,  and  business  conditions  with- 
in and  without  the  territory  affected — perhaps  more 
frequently  without  than  within;  the  competition 
can  never  cease;  and  the  establishment  of  rates 
will  inevitably  and  always  be  dominated  by  nat- 
ural forces,  which  may  be  depended  upon  to 
keep  the  rudder  true,  but  which  if  interfered 
with  will  inevitably  precipitate  distress  and  disaster. 
In  their  other  aspect  associations,  by  apportioning  the 


24 


business  carried  under  rates  so  controlled,  enable  the 
rates  to  be  steadily  and  uniformly  applied  to  all  ship- 
pers alike,  whether  the  figures  fixed  go  up  or  go  down. 

Rates  are  "fixed"  (or  the  amount  thereof  determined) 
under  conditions  beyond  the  control  of  the  carriers. 
The  figures  must  be  fought  out  and  registered  in 
meetings  held  for  that  purpose.  Arbitrations  are  often 
necessary.  Without  such  machinery  the  only  result 
possible  is  a  series  of  rate  wars  ruinous  to  all  inter- 
ests and  the  ultimate  collapse  of  the  entire  railway 
system.  Each  traffic  manager  always  secures  for  his 
line  the  lowest  rates  that  can  be  made  without  induc- 
ing reductions  of  the  rates  of  other  lines  competing  for 
the  same  traffic,  or  competing  for  like  traffic  to  the 
same  market. 

Rates  are  not  "fixed"  by*  pools,  and  they  never  were. 
On  the  contrary,  while  pools  were  formerly  in  vogue, 
from  1865  to  1888,  the  rate  per  ton  per  mile  on  six  lead- 
ing Eastern  roads  decreased  from  2.900  to  .609,  and  on 
six  leading  Western  roads  from  3.642  to  .934.  The 
function  of  pools  is  simply  to  assist  in  assuring  the 
public  that  each  carrier  will  stand  by  the  "fixed"  rate 
until  changes  are  made  through  methods  which  will 
disturb  business  the  least  possible. 

It  is,  of  course,  possible  that  rates  may  occasionally 
be  "fixed"  on  a  higher  basis  than  would  be  adopted 
if  their  maintenance  was  not  to  be  supported  by  a  pool- 
ing agreement;  but  this  will  rarely  if  ever  be  done  ex- 
cept in  cases  where  unreasonable  reductions  have  pre- 
viously occurred  and  where  the  results  of  excessive 
competition  demand  correction.  Stability  in  rates  is 
of  infinitely  more  importance  to  the  public  than  too 
low  rates;  and  as  a  practical  matter  extortionate  rate 
charges  cannot  be  maintained  in  the  face  of  present 
corrective  influences  and  agencies.    Pooling  can  never 


25 


be  the  panacea  for  all  existing  ills  of  the  railway  ser- 
vice which  some  of  its  advocates  seem  to  expect,  bnt 
it  will  undoubtedly  ameliorate  the  vices  of  excessive 
competition  which  its  prohibition  induces,  and  almost 
compels. 

It  has  lately  been  deliberately  stated,  and  very  likely 
it  is  quite  generally  believed,  that  "the  purpose  of  a 
pooling  law  is  to  eliminate  entirely  from  railway  opera- 
tions with  respect  to  the  traffic  which  it  affects  the  fac- 
tor of  railway  competition."  It  is  difficult  to  argue 
with  those  who  entertain  such  a  belief  as  that;  its  mere 
statement  shows  how  remotely  they  apprehend  the  true 
conditions.  It  would  be  easy  to  refute  it  by  illustra- 
tion and  experience  if  time  and  space  allowed.  As 
well  might  a  coffer-dam  be  expected  to  subdue  the 
waves  of  the  ocean. 

The  fact  important  for  present  consideration  is  this: 
That  a  feeling  exists  and  may  be  regarded  as  quite 
generally  prevalent  that  railways  desire  to  pool  their 
traffic  earnings  in  order  to  secure  and  perpetuate  high- 
er standards  of  rates;  or,  at  least,  to  avoid  the  further 
reduction  of  existing  rate  standards  through  the  efface- 
ment  of  competition.  It  is  useless  to  explain  that  the 
object  of  pools  is  to  provide  a  basis  by  which  railroads 
may  overcome  the  illegitimate  competitive  methods 
which  the  Interstate  Commerce  Law  forbids.  It  is 
futile  to  point  to  the  vast  reductions  in  rates  accom- 
plished while  pools  were  formerly  in  use.  It  is  idle 
to  show  that  pools  can  never  reach  to  the  inclusion 
of  every  competitive  factor,  or  to  point  to  the  fact  that 
the  competition  of  markets  cannot  be  extinguished  by 
any  action  that  may  be  taken  by  common  carriers;  no 
one  seems  to  remember  that  pools  at  best  are  formed 
with  difficulty  and  are  of  brief  duration,  every  member 
hoping  for  increased  percentages  at  the  next  allotment 


26 


and  striving  in  a  thousand  legitimate  ways  to  increase 

the  earnings  of  the  various  lines.  No  attention  is  given 

to  explanations  of  the  difference  between  legitimate 
and  illegitimate  competition;    between  competition 

which  is  useful  to  the  public  and  that  which  is  disas- 
trous; between  competition  which  obeys  the  law  and 
that  which  ignores  and  overrides  it.  It  does  no  good 
to  show  that  excessive  competition  is  an  enemy  to 
human  progress  which,  unless  restrained,  results  in 
monopoly  through  the  extinguishment  of  competitive 
agencies.  When  the  human  mind  is  once  set  upon  the 
adoration  of  the  fetich  of  "free  and  unrestricted  com- 
petition" reasons  fail  to  impress  and  facts  disappear 
from  view.  Even  the  Interstate  Commerce  Commis- 
sion in  their  recent  Annual  Keport,  while  expressing  a 
majority  opinion  that  pooling  would  "occasion  some 
improvement  in  the  rate  situation  at  almost  all  points 
and  might  altogether  amend  it  at  many  points/'  adds 
the  assertion  that  "If  pooling  produces  any  beneficial 
result  it  does  so  at  the  expense  of  competition;"  with- 
out noting  that  it  is  excessive  and  illegitimate  compe- 
tition which  pooling  aims  to  curb;  and  then  follows  this 
most  remarkable  assertion:  "It  is  only  by  destroying 
competition  that  the  inducement  to  deviate  from  the 
published  rate  is  wholly  removed,  and  it  is  only  to  the 
extent  that  competition  is  actually  destroyed  that  bene- 
ficial results  can  be  expected." 

Destroying  competition,  forsooth!  As  if  competi- 
tion between  railroads  can  ever  be  destroyed  so  long 
as  separate  ownership  and  management  exist!  The 
keen  edge  of  reckless  and  illegitimate  competition  be- 
tween the  railroads  of  the  United  States  to-day  may  to 
some  extent  be  dulled,  its  excesses  may  be  ameliorated 
and  somewhat  held  in  check,  by  agreements  to  partici- 
pate upon  agreed  shares  in  the  carriage  of  common 


27 


traffic,  but  talk  of  the  destruction  of  competition  is  too 
absurd  to  be  taken  seriously.  Competition  carried  to 
excess  mar  destroy  itself  by  bringing  on  the  successiye 
ruin  of  the  indiyidual  competitors,  but  it  will  neyer  be 
destroyed  by  any  system  of  internal  regulation  provid- 
ed  by  the  competitors  themselves,  intended  to  preserve 
the  indiyidual  existence  of  each  competing  element. 

Nevertheless,  we  have  the  clamor  and  the  threat, 
and  must  face  the  situation  as  it  is.  The  spectre  of  a 
gigantic  railway  trust  is  lifted  on  high  by  men  who 
should  know  better,  and  the  public  is  duly  terrified  at 
the  fearful  vision.  The  enactment  of  a  pooling  bill, 
says  the  Commission,  "would  be  little  better  than  a 
crime  unless  this  tribunal  or  some  other  tribunal  is  at 
the  same  time  invested  with  adequate  powers  of  con- 
trol." Very  good;  control  need  not  be  feared  where 
no  injury  to  the  public  is  contemplated.  By  all  means 
let  the  Commissioners  have  all  the  control  that  can 
properly  be  conferred  upon  them. 

But  when  we  come  to  consider  the  forms  of  control 
proposed,  much  more  is  asked  than  can  properly  be 
granted.  Shall  association  agreements  containing 
pooling  features  be  filed  with  the  Commission?  Yes, 
certainly.  Such  agreements  are  filed  with  the  Com- 
mission as  a  matter  of  course,  and  thereby  become  pub- 
lic records.  Shall  the  Commission  have  the  power  to 
examine  them  before  they  become  effective  and  to  turn 
them  to  the  wall  if  thev  so  decide?  Certainlv,  if  this 
is  desired.  At  first  the  Commission  protested  that  it 
wanted  no  such  responsibility  as  that;  but  times  have 
changed,  and.  the  Foraker  bill  now  pending  in  Congress 
authorizes  the  Commission  to  disapprove  any  agree- 
ment if  of  opinion  that  its  operation  ''would  by  rea- 
son of  its  provisions  or  for  want  of  necessary  restric- 
tions and  limitations  result  in  unreasonable  rates,  un- 


28 


just  discrimination,  insufficient  service  to  the  public, 
or  otherwise  contravene  any  of  the  provisions  of  this 
act."  This  is  certainly  broad  enough  as  a  preliminary 
to  the  taking  effect  of  the  agreement.  Assuming  the 
agreement  to  have  passed  this  preliminary  inspection 
and  become  operative,  the  proposed  bill  makes  it  the 
duty  of  the  Commissioners  to  observe  the  working,  op- 
eration and  effect  of  every  such  contract,  to  make  ex- 
aminations and  investigations  as  deemed  necessary,  to 
investigate  all  complaints;  and  confers  power  upon  the 
Commission  to  make  an  order  disapproving  the  con- 
tract and  requiring  it  to  be  terminated  if  it  finds  cause 
for  so  doing.  It  is  the  obvdous  purpose  of  these  provis- 
ions to  give  the  Commission  complete  and  final  control 
over  pooling  contracts;  control  over  their  inception 
with  power  to  prevent  them  from  going  into  operation, 
and  control  over  their  existence  with  power  to  declare 
them  "unlawful"  at  any  time.  These  provisions  cer- 
tainly appear  adequate  to  protect  the  public.  It  is  felt 
by  railway  managers  that  such  conditions  as  these  may 
properly  be  made,  in  granting  the  opportunity  which 
they  desire  to  practically  demonstrate  the  truth  of 
their  belief  that  such  contracts  will  be  found  useful  to 
the  public  and  an  aid  to  the  regulative  statute. 

But  the  Commission  desires  something  far  beyond 
what  has  been  described  above.  The  Commissioners 
seek  to  make  this  honest  effort  of  the  railroads  to  put 
their  business  under  the  control  of  a  workable  law  an 
occasion  whereby  they  may  grasp  and  forever  hold  the 
power  which  decisions  of  the  Supreme  Court  have  re- 
centlv  denied  them.  This  is  not  an  overstatement  of 
their  position.  Their  words  are  as  follows,  referring 
to  the  powers  of  control,  without  which  they  say  the 
granting  of  a  pooling  privilege  would  be  little  better 
than  a  crime:   "Nothing  less  in  degree  than  those  out- 


29 


lined  in  this  report  or  their  equivalent  would  be  ade- 
quate." 

The  powers  outlined  in  the  report  and  submitted  to 
Congress  for  adoption  and  approval  cover  all  that  the 
wildest  advocate  of  a  bureaucratic  system  could  de- 
sire. It  is  not  proposed  to  recapitulate  them.  It  is  suf- 
ficient to  say  that  they  would  confer  upon  the  Commis- 
sion absolute  power  over  all  interstate  railway  rates. 
Not  simply  over  the  rates  upon  the  traffic  subject  to 
the  proposed  pooling  agreements,  which  might  be  con- 
ceded as  a  trade,  though  of  itself  would  be  an  unreason- 
able demand  because  such  a  concession  would  not  be 
cognate  to  the  grant;  the  contract  being  the  thing 
granted  and  over  which  absolute  power  is  intended  to 
be  given.  But  power  over  the  rates  upon  all  traffic  sub- 
ject to  the  law.  The  power  desired  is  the  most  enor- 
mous ever  conceived  by  human  intellect.  It  is  now  ex- 
ercised through  the  agency  of  thousands  of  experienced 
men,  each  representing  not  only  the  interests  of  his 
line,  but  of  the  customers  of  his  line,  whose  increased 
business  is  also  his  increased  business.  It  is  subject  to 
the  control  of  general  laws,  as  above  pointed  out,  and 
also  to  the  domination  of  all  manner  of  competitive 
forces  of  carriers  by  land  and  by  water,  of  manufac- 
turers and  producers  from  every  point  of  the  compass, 
of  markets  in  this  countrv  and  throughout  the  world. 
For  this  arrangement  it  is  calmly  proposed  to  substi- 
tute the  judgment  of  five  men,  of  three  if  the  five  do 
not  agree,  trained  as  lawyers,  representing  five  locali- 
ties only,  with  power  to  ruin  industries,  to  boom  towns, 
to  "determine  whether  the  Kansas  farmer  shall  burn 
his  corn  for  fuel  or  send  it  to  the  market;"  and  with 
power  at  the  same  time  to  make  or  break  every  railroad 
corporation  in  the  land,  to  send  any  railroad  stocks  or 
bonds  up  or  down  in  the  stock  market,  to  control  impor- 


30 


tations  of  every  kind  and  to  limit  all  exportation 
(which,  by  the  way,  is  involved  in  rulings  already  made 
by  the  Commission),  to  exclude  Baltimore  or  Boston  or 
any  other  city  from  the  transaction  of  export  business 
by  changing  existing  differentials^  to  array  North 
against  South  and  East  against  West  by  overturning 
conditions  established  by  competition  and  substituting 
therefor  the  decree  of  the  rule  of  thumb;  in  fact,  to  ab- 
solutely dominate  this  land  of  ours  with  the  power  of 
pagan  consuls. 

This  is  no  fancy  picture.  The  amendments  proposed 
by  the  Commission  give  them  power  upon  complaint 
filed  to  make  what  they  would  like  to  call  an  "admin- 
istrative order,"  determining  "what  are  and  will  be 
reasonable  and  otherwise  lawful  rates,  fares,  charges, 
classification,  privileges,  facilities  or  regulations." 
These  orders  may  be  enforced  in  the  courts,  with  resti- 
tution of  all  charges  made  at  the  old  rate  after  the 
complaint  was  filed;  and  the  carriers  are  to  have  the 
right  to  appeal  to  the  courts  upon  the  Commissioners' 
record,  with  no  right,  however,  to  recover  costs  on  such 
appeal.  If  the  order  is  vacated  the  Commission  may 
make  a  new  order  on  the  same  record.  Other  provis- 
ions authorize  the  Commission  to  fix  maximum  and 
minimum  rates,  to  determine  the  division  of  joint  rates, 
to  make  changes  in  classifications,  and  to  amend  the 
rules  and  regulations  of  the  carriers.  The  authority 
proposed  is  adequate  to  cover  every  question  that  may 
arise  in  respect  to  future  railway  rates.  The  list  given 
by  the  Commission  of  cases  now  pending  and  of  mat- 
ters previously  heard  by  them  shows  the  scope  of  the 
questions  which  they  ask  authority  to  decide.  As  an 
example,  may  be  cited  the  adjustment  of  freight  rates 
to  the  Southern  States,  from  Eastern  as  against  West- 
ern cities,  and  many  other  questions  arraying  one  sec- 


31 


tion  of  the  country  against  another.  In  the  face  of 
these  proposals  the  position  of  the  roads  becomes  ex- 
ceeding difficult.  Of  course,  the  idea  of  granting  them 
should  not  be  seriously  entertained.  Yet  our  thoughts 
return  to  the  existing  laws  under  which  an  honest  man 
cannot  do  business.  The  true  way  out  of  this  dilemma 
is  for  Congress  to  pass  such  amendments  to  the  present 
statutes  as  are  necessary  and  wholesome,  and  to  do  no 
more.  The  amendments  above  outlined,  coupled  with 
such  powers  of  control  as  may  properly  be  attached 
thereto,  will  be  found  not  only  beneficial  to  the  car- 
riers, but  also  to  shippers  and  receivers  of  goods  and  to 
all  interests  affected  by  the  proper  operation  of  the 
American  railway  system. 


December  24,  1897. 


MM  I 


1 


A 


